TELSTRA GROUP LIMITED — Investor Presentation 2011

Feb 27, 2011

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28 February 2011

The Manager

Company Announcements Office Australian Securities Exchange 4[th] Floor, 20 Bridge Street SYDNEY NSW 2000

Office of the Company Secretary

Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA

General Enquiries 08 8308 1721 Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

Retail Shareholder Information Sessions – presentation

Attached is a copy of a presentation to be delivered by John Stanhope, Chief Financial Officer, at Telstra’s Retail Shareholder Information Sessions, which commence today. In accordance with the Listing Rules, this is for release to the market.

Regards

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Carmel Mulhern

Company Secretary

Telstra Corporation Limited ACN 051 775 556 ABN 33 051 775 556

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TELSTRA SHAREHOLDER INFORMATION SESSION John Stanhope, CFO

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DISCLAIMER

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These presentations include certain forward-looking statements that are based on information and assumptions known to date and are subject to various risks and uncertainties. Actual results, performance or achievements could be significantly different from those expressed in, or implied by, these forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Telstra, which may cause actual results to differ materially from those expressed in the statements contained in these presentations. For example, the factors that are likely to affect the results of Telstra include general economic conditions in Australia; exchange rates; competition in the markets in which Telstra will operate; the inherent regulatory risks in the businesses of Telstra; the substantial technological changes taking place in the telecommunications industry; and the continuing growth in the data, internet, mobile and other telecommunications markets where Telstra will operate. A number of these factors are described in Telstra’s Financial Report dated 12 August 2010 and 2010 Annual Debt Issuance Prospectus lodged with the ASX.

All forward-looking figures in this presentation are unaudited and based on A-IFRS. Certain figures may be subject to rounding differences. All market share information in this presentation is based on management estimates based on internally available information unless otherwise indicated.

All amounts are in Australian Dollars unless otherwise stated.

® ™ Registered trademark and trademark of Telstra Corporation Ltd. Apple is a trademark of Apple Inc, registered in the US and other countries. iPhone is a trademark of Apple Inc. Other trademarks are the property of their respective owners.

2

TELSTRA INDUSTRY TRANSITION

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$25b
$20b
Other
Directories
IP & Data
Mobiles
Broadband
PSTN
2000 2002 2004 2006 2008 2010
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3

STRATEGY - FOUR MAJOR INITIATIVES

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1. IMPROVING CUSTOMER SERVICE

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2. RETAIN AND GROW CUSTOMERS

3. SIMPLIFYING THE BUSINESS

4. NEW GROWTH BUSINESSES

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4

CUSTOMER SERVICE RESULTS

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NEW INITIATIVES

• 24/7 for sales and service

• Weekend technician appointments

• IVR improvements

• Free calls to Telstra key service and support numbers

• Dedicated move team for moving home

• Telstra Plus Premium Service

• Improved complaint management standards

EARLY RESULTS

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Customer Satisfaction
Survey Results
+6%
+1.5%
FY10 1H11 FY11
Target
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5
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STRONG GROWTH IN CUSTOMERS FROM OUR STRATEGY

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	Product 1H11
	N dd (‘000) et a s Bundles 420
	T-Box and T-Hub (sales) 214 Postpaidmobilehandheld 297
	Mobile broadband 505
	Total mobile SIOs 919 Retail Fixed Broadband 139

6

NEW GROWTH AREAS

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Network Applications Asia Media
and Services
TM
REACH CHINA
T-Box
7
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FINANCIAL RESULTS - REPORTED

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	FINANCIAL RESULTS - REPORTED
	% On track
	$ Billions 1H10 1H11 versus change guidance Sales Revenue 12.32 12.26 -0.5 
	Profit After Tax 1.85 1.19 -35.6 n/a
	Ordinary Dividends Per Share (cents) 14 14 - 

8

SALES REVENUE BY PRODUCT

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$5m -$182m
$363m +1%
-18.7%
$12,323m -$253m $50m -$49m
+13.4%
$12,263m
-8.4% +10.0%
-0.5%
+$9m -$3m
+1.2% -0.3%
Fixed Fixed IP & Mobiles Network Adv Hong Kong Other
1H10 1H11
telephony Retail Data Applications & Mobile
Broadband Access & Services Directories
9
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NATIONAL BROADBAND NETWORK UPDATE

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COMMERCIAL TERMS AGREED

APPROXIMATELY $11 BILLION POST-TAX NPV

TARGETING 1 JULY SHAREHOLDER VOTE

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10

NBN – TIMING OF THE DEAL

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Financial Commercial EGM: Seek
Heads of Terms shareholder
Agreement agreed approval
INDEPENDENT EXPERT REVIEW
LEGISLATION
SHAREHOLDER
NEGOTIATE DEFINITIVE AGREEMENTS ACCC CONSULTATION/REVIEW
CONSIDERATION
20 30 31 2010 2011 10 28 1
JUN SEP OCT FEB MAY JULY
2010 2010 2010 2011 2011 2011
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11

CONCLUSION

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STRONG SALES MOMENTUM

DELIVERY ON STRATEGY

FULL-YEAR GUIDANCE CONFIRMED

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12

Telstra Retail Shareholder Information Session John Stanhope, Chief Financial Officer

Good morning and thank you for being here today. My name is John Stanhope and I am the Chief Financial Officer of Telstra.

It has been some time since I have travelled around the country to meet our retail shareholders so today, I would like to provide you – the owners of Telstra– with an update on the company. In doing so, I will cover off three main areas:

Firstly, I will talk about the exciting changes happening in our industry and Telstra’s strategy to respond.

I will also discuss our half year financial results which we reported a couple of weeks ago. Pleasingly, we have regained momentum and announced a very strong sales result for the first half with nearly one million Australians coming back to Telstra.

Finally, I will provide an update on the National Broadband Network and what this will mean for Telstra and importantly, our shareholders. There has been a lot of publicity around our NBN negotiations and this is obviously a critically important subject for Telstra and our owners. I will address this in more detail later, but I am sure you will appreciate that some elements of our negotiations must remain confidential until they are finalised

I will then open up to questions as I am sure you have a lot to ask.

But first I want to focus on our strategy and our ever changing industry.

Across the globe, the telecomminucations industry is going through a major transition. The reason for this transition is quite simple. People are moving away from the fixed telephone and instead communicating via mobiles, the mobile internet and social media.

That is why revenue from the traditional fixed phone business is falling around the world. Since 2005, our traditional fixed revenue has fallen by $1.9 billion – from $7.7 billion to $5.8 billion and now makes up less than 25% of Telstra’s total revenue.

In the same period since 2005, Telstra’s mobile voice revenues have risen and there has been an explosion in the use of phones for everything from text messaging to social media to Web browsing. That is why total mobile revenues have increased by $2.6 billion – from $4.7 billion to $7.3 billion and now exceeds fixed revenues.

I can assure you that Telstra is well placed to make this Industry Transition, because we have already invested in the networks and systems that have delivered some of the best mobile and fixed networks in the world.

Our challenge now is how to respond to drive sustainable, profitable growth for our shareholders and that was the basis of the strategic review we undertook last year.

As we looked at our business over 18 months ago, we had three concerns:

• We were losing market share,

• There were pressures on our operating costs and

• •Our customer satisfaction levels were declining.

We had a difficult choice to make...

1. Should we manage the business for short‐term cash, rather than addressing the cost structures of the business and the loss of customers?

2. OR, should we manage this business for long‐term returns…by investing to retain market share, improving customer service and embarking on a continuing transition process to drive a lower‐cost operating model? That is, making our business simpler, serving our customers better and reducing costs.

We chose option 2, because we could not ignore the fundamental changes that are underway in this industry, and we are committed to serving the long‐term interests of you…our shareholders.

To address these challenges we have embarked on a strategy through implementing 4 strategic initiatives.

1. Improving our customer service – we must do the basics right.

2. Retaining and growing our customers.

3. Simplifying and restructuring the business; and

4. Developing new businesses to grow the company and shareholder value – with a focus on organic growth.

These 4 initiatives will build a stronger Telstra.

So how are we doing in some of these areas? I will firstly talk about customer service.

We have implemented many improvements in this area, and we are making progress, but there is still a long way to go.

Our improvements are proving very popular. We have completed thousands of weekend appointments since they were launched last May. And we’ve taken more than 2 million calls after regular business hours since 24/7 was launched late last year.

These initiatives, and others like them, are already contributing to lower customer churn, that is, the number of customers leaving Telstra, and we have also seen an improvement of 1.5% in surveys of customer satisfaction. Our target is to achieve a 6% improvement this financial year. We have improved our results further in January and importantly are continuing to close the gap on our competitors.

We have made customer satisfaction a key element of company incentive plans – with 40% of management incentive based on this measure alone.

We are very serious about this. We are already making small gains, and we have taken decisions that will lead to improvements in customer service over the medium‐ to long‐term.

The second element of our strategy is to win new customers.

The results are very positive this half as you can see:

• During the half, we added 420 thousand bundled customers. This is very encouraging and importantly, they are on two‐year contracts.

• We have also added 919 thousand mobile customers during the half. This included nearly 300 thousand postpaid mobile handheld customers and more than half a million mobile broadband customers. Customers clearly value services on our fast and reliable Next G Network.

• And we added 139 thousand retail fixed broadband services during the half. This reversed the downward trend of recent halves.

Our strategy is working – we are taking market share back. We have done this by introducing more competitive pricing and more compelling offers for handsets.

Another element of our strategy is to identify new growth opportunities to build shareholder value.

These opportunities are in network‐based applications and services, our Asian businesses and our media businesses.

Network applications and services, such as the supply of on‐line photo storage for consumers, is a great opportunity for us to leverage our network investments. It is currently a $1 billion business and we expect significant growth over the next few years driven by opportunities in the enterprise and small business markets, but also in the consumer market.

In Asia I am very pleased with the momentum we are seeing at CSL, our Hong Kong mobile company. Revenue growth has been solid due to the continued customer demand for smartphones driving handset and data revenues.

We also have a valuable suite of media assets that we are leveraging. Foxtel continues to perform well, and we are pleased to reach an agreement to offer Foxtel content on our T‐Box IP TV service. We have also sold over 100,000 T‐Boxes since launch. Our directories business, Sensis has faced a difficult six months, but we have a digital strategy in place to ensure that Sensis is a long‐term, profitable part of our business

So how is this strategy translating into the financial results? Well I am pleased to report that we are starting to see the early signs of our strategy working.

It is important to note that our financial results have been impacted by the spending necessary to implement our new strategy. However we have seen great momentum in the growth of our customer base in the half. This positions the company well for revenue growth in the future.

So for the 6 months to December 2010, sales revenue was flat at ‐0.5% compared to a 2% decline for the full year last year, and net profit after tax declined by 35.6% as we invested around $700 million this half to retain and grow our customer base, improve customer service and simplify our business and core processes.

We expect a significant improvement in the financial performance in the second half as many of our investments were focussed in the first half, and we will see the benefits of the customer growth flows through.

We also declared a fully franked interim dividend of 14 cents per share which will be paid on 25 March. Our fiscal year 2011 guidance was also confirmed, including our commitment to pay a 28 cents fully franked dividend across the next two years, subject of course to Board approval.

From a product perspective, I wanted to give you an overview of what has contributed to our sales revenue performance this last half. This also gives you an indication of some of the structural challenges we face and how we are able to address them.

As you can see, our traditional fixed line business declined by $253 million as usage levels continue to fall across all calling categories. However the decline in this revenue was more than offset by the continued strong growth in mobiles. Total mobile revenue grew 10% or $363 million to $4 billion. We also saw strong growth in our Hong Kong Mobiles business, which grew by 13.4%.

Before I finish up, I would like to provide you with an update on the National Broadband Network.

We continue to make good progress towards finalisation of our NBN negotiations.

We have announced the finalisation of key commercial terms with NBN Co and the Federal Government.

The total post‐tax net present value of the transaction is approximately $11 billion.

So what does this $11 billion relate to and what does it mean for Telstra and our shareholders?

Firstly there are 2 components of the $11 billion.

Around $9 billion relates to fair consideration for decommissioning our copper and cable broadband network, and agreement for NBN Co to pay for access to Telstra’s infrastructure over a 30 year plus period. What this means is that we have agreed with NBN Co to decomission or “switch off” our copper and cable broadband network and to migrate the traffic off these networks on to the new fibre network as this is built. NBN Co who are obviously building the network have stated that the roll out may take 8 to 10 years and it will be over this time that customers are migrated to the new fibre network.

It is important to remember that this consideration will not be received upfront, but over the course of many years.

The remaining $2 billion is the value to Telstra of the Government’s commitments to policy changes which will reduce certain costs, primarily for the Universal Service Obligation.

In terms of a timeline for our shareholders, having now finalised the key commercial terms, we have a formal roadmap for completing the definitive agreements.

We are now working to complete the necessary documentation that we will then provide to you ahead of a shareholder vote.

This includes the need to get an independent expert to review any agreements and ensure that the value to our shareholders of this arrangement is fair value. Only then will our shareholders have the information to finally vote on these agreements at an EGM.

While there is still work to be done, we have a target date of July 1 to put the proposal to our shareholders. It is an ambitious target and let me be clear that it depends on a number of factors that are outside our control, including ACCC approvals and legislation. But it is a target we believe is achievable.

Before I take questions, let me remind you once more of my key messages.

1. Firstly, we have strong sales momentum in the first half with over 1 million mobile and fixed broadband customer services added;

2. Second, we are delivering on our strategy;

3. Thirdly, we are confirming our full‐year guidance; and

4. We have passed a critical milestone in our NBN negotiations.

As you can see, we have taken a number of concrete steps to improve customer service, retain and grow our customer base, simplify the business, and grow shareholder value in three new markets.

Our strategy is working.

Thank you.